Blog Entries by Andrew Kaplan

Flavors—sometimes you want ’em, sometimes you don’t. At least that seems to be what is going on in the beverage business these days. For some categories, the greater variety of flavors a beverage can come in, the better. For others, coming out with a bunch of new flavors may actually do more harm than good. The trick is figuring out exactly where your brand falls when it comes to flavor innovation.

So, which beverage categories are ripe for more flavor innovation and which appear to have peaked in this regard?

One category that could see more flavor innovation in this new year is CSDs. It’s a category that could use some new excitement to help reverse declining sales, and some innovative flavors—tastefully done, mind you—could be just what it needs. So far, much of the flavor innovation in soda has been designed to appeal to younger drinkers. But I’ll bet that some grown-up flavors, using more wholesome ingredients, could catch the interest of older drinkers.

On the alcohol front, the new year brings some very interesting developments when it comes to flavors. For one thing, a study released just as 2013 was coming to a close revealed that flavored vodkas—an enormously popular trend which has really boosted this category—may have already peaked in popularity. Restaurant Sciences LLC, , an independent firm that closely tracks food and beverage product sales throughout the foodservice industry in North America, reported that the sales of on-premise flavored vodkas fell 11.7 percent from Q3 2012 to Q3 2013. Analyzing more than 170 million drink orders, the organization uncovered that flavored vodkas lost nearly one percent of their on-premise spirits market share from Q3 2012 to Q3 2013. So, it appears that while flavored vodkas remain quite popular, consumers may not be open to any additional flavors for their vodka in 2014.

Another spirits segment where flavors can be tricky is whiskey. The Wall Street Journal reported that Brown-Forman Corp. Chief Executive Paul Varga plans to take a “conservative” approach to rolling out new flavors for Jack Daniel’s. While Tennessee Honey, introduced in 2011, has done great, Varga and his team have correctly realized that for some beverages, too much flavor can go too far. After all, when it comes to a heritage brand like Jack Daniel’s, already savored so much for its inherent flavor, too much tinkering can probably do more harm than good.

As I write this, in the middle of November, it seems that time itself is weighing heavily in the air. There is a strong feeling of nostalgia over the 50-year anniversary of the Kennedy assassination. The Congress just overhauled its filibuster rules for the first time in a generation. And (as editor-in-chief Jeff Cioletti so richly detailed in our last issue) the beverage alcohol industry in the U.S. reflected this year on the 80th anniversary of the Repeal of Prohibition—its meanings and its lessons.

And then, of course, there’s the issue you hold in your hand. As you see, it contains our HIT List, our annual roundup of the (mostly) winning things that happened in the beverage business in the past year.

Al of this, as you could imagine, had me thinking about “time” itself and the special relationship the beverage profession has with it. For the beverage business is one of the oldest ones in existence. If anyone asks you what you do for a living, you could say, “Well, I work in one of the oldest professions,” and have them give you a funny look.

This is especially true of the beer business. The Washington Post began this year—on Jan. 7, to be exact—by publishing an article which suggests that beer may have been the crucible of civilization! Ok, I may be exaggerating a little, but not by much. The article, entitled “Discovery of ancient breweries offers clues of primitive lifestyle,” details the recent discoveries of ancient brewing and feasting halls dating back 11,000 years (in Turkey) and 3,500 years (in Cyprus). It then cites archeologists who suggest the social lubricating effect of ancient beer may have served as the glue that helped rival villages bond and merge into larger communities.

So what’s different about the beer business today and the one that helped give rise to civilization thousands of years ago? I’d bet you its pace, as in, one was pretty darn slow, while the other is scatter-brained fast! And this doesn’t just hold for the beer business, but the entire beverage business.

It all makes me wonder: have we reached a point where our sense of time is so compressed that we are hurting our companies’ chances of success?

Case in point, I attended a trade show recently where I was chatting with the owner of a new beverage startup and asked him how old his company was. He told me two years and I matter-of-factly said, “Oh, so you’re pretty new.” His point-blank reply: “Not really.” It struck me that his sense of time was different than mine. As an entrepreneur doing business in America today, he considered himself a tried-and-true veteran after just a couple of years in business.

Maybe he’s right? My gut was that he’s not. I still think it takes years and years of hard-work to really build the support structures that result in a successful beverage business, one that lasts and isn’t fly-by-night. It takes time to cement strong, deep relationships with consumers, distributors, and retailers. We may live in a fast-paced world, but relationships take time to build.

Beverage marketers today are faced with the ongoing challenge of finding their way through the ever-growing thicket of media opportunities and getting their ads watched by consumers. Boy, how times have changed since the ’70s when Coke tried to teach the world to sing or offered Mean Joe Green some refreshment! Yes, things were relatively easy back then when there were just a handful of channels and no internet.

Actually, beverage brands, at least for now, have been relatively lucky. While many viewers already record their favorite shows and fast-forward through the commercials, they still tend to tune in to live television events, especially sports. And, as we all know, beer and soda go great with that Sunday game.

But advertising against live sporting events can only go so far. So increasingly, beverages have turned to YouTube, video games, smart phones and any number of other emerging media to reach consumers.

But now comes word that many of the major brands have a lot of work to do when it comes to at least one of these powerful new channels—YouTube. According to a study from digital media company Touchstorm, large beverage brands like Coke are trailing smaller brands when it comes to harnessing the powers of YouTube for marketing. In fact, only 74 brands rank among the top 5,000 YouTube publishers in the Touchstorm Video Index: Top Brands Edition. Says Alison Provost, CEO of Touchstorm: “With only 74 brands appearing in the YouTube top 5,000, it’s clear there’s a significant brand fail on one of the most important platforms today. YouTube has provided a content testing ground where celebrities, users, brands, content producers, retailers, and YouTube stars all have the same tools available to attract audiences. And while brands can afford to buy views and advertise their content, they’ve made very little progress in the organic viewership ecosystem.”

Among the study’s key findings:

•Big brands need to study small brands. Blendtec is in the top 10 yet Coke and Pepsi are not; the Mormon Church ranks yet top global brands Apple and Microsoft do not; Ford Models ranks higher than Ford Motors and Little Tykes overwhelms Toys ‘R’ Us.

Brands need to define the competition broadly. The other 4,926 publishers, which include musicians, teenagers with webcams, and professional content producers, have vastly out-performed brands in finding an audience for their content.

Brands can’t spend their way to the top. About one-third of the brands made the list by buying a significant amount of YouTube advertising, but the other two-thirds got there through organic growth.

International brands build audiences. Brand channels from Brazil, Latin America and Japan make the list, beating out tens of thousands of English-language brand channels.

And finally, there are two routes to the top. Some brands made the list on the backs of a viral video or two; others made it by publishing less spectacular content more regularly.

The list of 74 brands that place inside the top 5000 channels on YouTube is available at Touchstorm.com.

During a time when there’s been a lot of bad news for our leading soft drink company, there’s been one overwhelming positive, and that is the man at the very top: Muhtar Kent.

It appears to me that Kent came along at just the right time for Coke. His style of leadership is what this company, embattled in so many ways these days, really needs. In fact, Kent, a true man of the world, has become the face of Coke today during a time when Coca-Cola really needed a benevolent presence to counter all the criticism it is taking almost on a daily basis.

Look at Coke today and it’s almost as if there are two companies constantly being featured in the news: the one we see bashed every day for problems like the obesity epidemic, and then the one that is increasingly found on the world stage as a responsible, even admirable global citizen. Credit for much of the latter goes to Kent.

If you don’t know that much about Kent, a little background. Mark Pendergrast, in his definitive history, “For God, Country & Coca-Cola,” calls Kent: “The ultimate international Coca-Cola man,” and goes on to detail how he has worked for Coke since the age of 25. He was born in New York City, the son of a Turkish general consul, Pendergrast details, was educated in private schools in Turkey, and also lived in Thailand, India and Iran while his father was an ambassador in those countries. He speaks fluent English, Turkish, Italian and French, writes Pendergrast, who goes on to add that “at 6’1”, Kent has a commanding, tough nonthreatening presence with a friendly, gregarious demeanor.” Pendergrast also says that Kent’s father apparently served as a strong role model for the young Kent, describing him as having a “strong humanitarian bent.” In fact, during World War II he helped save Turkish Jews from the gas chambers while serving as consul general in Marseilles.

Such a humanitarian bent is quite evident when looking at Kent’s piloting of the huge multinational conglomerate that is Coke: when he is advocating for women’s empowerment around the world, or appearing at the Clinton Global Initiative (CGI) Annual Meeting—as he did just as I was writing this in late September—to make a global partnership announcement with other multi-national organizations to bring safe water access, basic necessities and employment opportunities to communities around the world.

If there’s any criticism to level against Kent, it might be that the U.S. business seems neglected with all of his international focus. After all, the cola business Coke was built on is struggling to reverse consistent declines. It could be argued Kent needs to confront head-on what is ailing the U.S. soda business with the energy and verve he has confronted these other global issues.

Nevertheless, I recently asked Pendergrast what he though about Coke’s recent leaders and he responded: “I think a huge amount of credit goes to those two men. Neville Isdell turned the ship in the right direction, and Muhtar Kent is powering it full steam ahead.”

My parents may be getting up there in age, but that hasn’t slowed them down just yet, especially when it comes to warning their children about the latest health “study” they heard about on the news or through some email chain.

Those of you who are regular readers of this column know by now I can be quite prickly when it comes to many of these so-called “studies.” It’s come up before in this space because, unfortunately, as anyone associated with the beverage business knows, this industry take the brunt—especially lately, but this has been going on for decades—of these ominous health warnings.

There are too many of them, and they are announced too frequently to even begin to summarize here. But it does seem that the so-called “experts” have smelled blood in the water when it comes to certain segments of our industry and they have converged on it like a swarm of feeding sharks.

The parental warning I refer to above was slipped in right at the end of a recent phone call with my mom, tucked in so nonchalantly I almost missed it as I was hanging up: “Oh, and don’t forget that drinking more than four cups of coffee a day can take years off your life!”

My reply was a typical, rolling-of-the-eyes, “What in the world do you mean?” as my fingers started automatically Googling the relevant keywords into my iphone’s browser (I’ve been to this rodeo before). Eventually, I did find the study, but a little more investigating immediately showed what I expected. The study itself lacked the standards that would support one that was respectable. I happened to have dinner with a friend later that evening who had studied statistics in college, and he explained the difference between a good study and a bad one. The good find causation between two things, the bad ones just correlations. Unfortunately, many of the studies we hear about today and get tossed around so often by the mass media are based on correlations, not causations. The coffee study is a good example.

In that case, it found that those who consume more than four cups of coffee a day and are under the age of 55 have a tendency to die at a significantly younger age than those who drink fewer than four cups of coffee a day. This was sloppily bullhorned by the media as showing a real link between consumption of more than four cups of coffee by those under 55 and early death. But a little more study of this study and you start to see it unravel. There was no real causation between the coffee drinking and the early demise, just a correlation. It just happens to be that those who drank that much coffee, in that particular age group, happened to die younger. The study didn’t take into account anything else: Did they have more trouble sleeping and needed caffeine to stay awake, for example? Did they tend to have extreme Type-A personalities?

Were they dealing with heavier workloads and have more stressful lives as a result? Did they consume a delicious donut with every cup of coffee?

If we as an industry are going to fight back against these poorly conceived studies, it’s important we know how to set their authors, the media—and, yes, even our parents—straight. I tried, respectfully, and as gently as possible with the latter, at least.